The recent strong rally in guar prices, both spot and futures, is possibly taking a pause as high prices are forcing buyers to halt purchases in the physical markets and traders in futures markets are unwinding positions, traders and analysts said.

The delay in the launch of August contract on National Commodity and Derivatives Exchange is probably prompting traders to wind down positions.

“There is no demand in spot. Now, prices are likely to move down,” said Mr Jaiprakash Sharma, a Jodhpur-based trader Guarseed and gum futures are also expected to consolidate at current levels tending towards the lower side, analysts said.

Front month guarseed futures are likely to move down to Rs 11,000 for 100 kg by the time of its expiry on February 20, Mr Dharmesh Bhatia, Analyst, Kotak Commodities, said.

“Overall, supply tightness is there but at these prices, there is not much demand. A correction is needed for export demand to pick up too,” said Ms Vedika Narvekar, Senior Analyst, Angel Commodities.

She expects the contract to decline to Rs 11,370 levels.

Regulatory move

Stumped by the recent continuous rise in guar complex, NCDEX has delayed the launch of August contracts of both guar seed and guar gum futures.

The move, done at the behest of the regulator, Forward Markets Commission, is the latest in the series of curbs or measures adopted to halt the relentless spike in prices of both guar seed and guar gum.

Guar prices, both spot and futures, have been continuously moving up touching record highs several times.

Guarseed futures for February delivery on NCDEX has risen three-fold since mid-August until now. On Monday, they were trading at Rs 12,075 for 100 kg, down 13.8 per cent, at 12:30 p.m.

Guar gum futures for the same delivery also recorded similar gains. They were being quoted at Rs 39,400 for 100 kg, down over 3 per cent from the previous close.

The sharp rise in guar seed, or cluster beans, which are used for the manufacture of guar gum, has drawn the attention of everybody including farmers, traders, investors, politicians and government officials.

The demand supply mismatch warrants a price rise but whether this rise is justified is the question that has emerged. Guar futures have been hitting the 4 per cent upper price limits almost daily prompting many market participants to conclude that this little known agricultural produce will be the star performer among commodities.

Many of the curbs imposed by the regulator include increasing special margins on the buy side, revising open position limits, imposing a trading ban on a few members among others.

The latest move to delay the launch of the far month contract is likely to impact those participants who have short positions, analysts said.

These participants will be forced to square off their positions with a loss, they said.

The delay in the launch of the far month contract would impact market's sentiment and thereby bring prices down, they said. It may prompt traders to wind down positions.

Volumes and open interest in guar complex have been declining last few sessions possibly due to many trading curbs. Declining volumes has prompted NCDEX to reduce special margins on guar futures.

“The regulator should have looked at innovative ways of tackling this rise in guar prices,” said Mr Kishore Narne, Head – Currency and Commodity Research, AnandRathi Commodities.

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